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Well, we are still hoping to bod on a foreclosed house at auction in 2 days. We paid a title company to do a preliminary report and they fould that there is a 2nd mortgage for $22,000. And they said this will have to be paid. Sounds like a big chunk of money, but if we allow for that in our bidding, then not so much of problem.

Maybe you guys will know if this amoutn can be negotiated down with the bank?? Thanks.

Footsox
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Sorry for the typo. That would be "We are hoping to BID on an auction property." Thanks.
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Hi Footy,

Well, we are still hoping to bid on a foreclosed house at auction in 2 days. We paid a title company to do a preliminary report and they fould that there is a 2nd mortgage for $22,000. And they said this will have to be paid. Sounds like a big chunk of money, but if we allow for that in our bidding, then not so much of problem.

You were told wrong; The 2nd lien is subordinate to the 1st lien, which may both be subordinate to any homeowner's association liens, and superior tax liens.

At the foreclosure auction, whatever the winning bid pays goes to the lien holders in their order of priority, until either all liens are fulfilled, or all funds are exhausted. If the liens are fulfilled before the money runs out, then the remainder balance goes to the foreclosed seller (minus the allowable legal costs of the foreclosure.)

If all the liens are *not* paid off, the unpaid lienholders generally get nada but the kiss of the wind. They're wiped out, and the new owner is provided clean title.

There can be exceptions when proper legal process is not followed, providing outstanding lienholders their chance to collect the funds available to their place in line... but these are the rare exceptions.

Maybe you guys will know if this amoutn can be negotiated down with the bank?? Thanks.
The answer is *yes*... but again, see above, you do *NOT* have to be concerned with paying off a 2nd lien if you are buying at the point of the foreclosure auction.

OTOH, if you are hoping to negotiate a better pre-auction (short-sale) deal, then the 2nd lien holders are currently accepting $3-5,000 to go away (if you are negotiating a short-sale with the underlying 1st in front of the 2nd lien.)

Luck!
Dave Donhoff
Leverage Planner
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Well, now I am confused. We paid a title company to research this property. Here is the e-mail I just received from them: "The 2nd mortgage would remain on the property---you would need to satisfy that mortgage before title would be clear." Hmmm... A little more info.-- This house has a judgement of $111,000 (approx). It is worth about the same amount (perhaps $100K to 110K) So, if what you are saying is correct, and let's say the house goes for exactly $111,000 at the auction -- then the whole $111K would go the the foreclosure bank. And the 2nd mortgage holder would get nothing?

I tried calling the 2nd mortgage holder and of course they wouldn't give me any info, unless I am the customer. The 2nd mortgage holder is GMAC. Does anyone have any inside contact or phone number?

This is very exasperating. We are just trying to buy a house at a reasonable price. We have paid a title company to do this research, and now I am at a dead end figuring out if thie 2nd mortgage holder will pass through to us and have a lien against the house after we buy it. It just seems like so many dead ends to buy a house at an auction. Even after we try to do the utmost research, we still don't get any answers from the 2nd lien holder.... Thanks for any replies....

Footsox
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During the foreclosure action, did the first mortgage holder include the second mortgage holder as a defendant? What happened then? What kind of document did the second mtg holder file? You may need an attorney to explain this to you.

Donnba
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Attorney seems like good advice, if only for peace of mind. Couple of hundred in consulting fees could be very cheap peace of mind.
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" Here is the e-mail I just received from them: "The 2nd mortgage would remain on the property---..."


Are they answering the question that you think they're answering?
Or are they telling you about what happens if you pay off the 1st in a short-sale arrangement?

I'm with the other reply - ask a RE lawyer.
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Yeah, I think I am asking a lawyer. The house auction begins day after tomorrow.... I probably won't get an answer from our attorney in time. It looks like this deal just won't happen.... too bad. It is a great house. Maybe we can get all the answers we need in time... I'll post back here and tell you all how it turns out. Thanks for all the help on this board. So much to learn!

Footsox
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Any updates? I'd love to hear what happened...
Jim
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